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TRADE South Asia shows glimmer of hope

Asjadul Kibria
Many believe that economic integration in South Asia is a myth. How can we expect greater regional integration when we are yet to increase the intra-regional trade, which is less than 5 percent, compared to 24 percent in ASEAN (Association of South East Asian Nation) or 48 percent in NAFTA (North Atlantic Free Trade Agreement), let alone 66 percent in European Union? This is a strong argument generally forwarded by many experts as well as other people discussing the future of South Asian trade flow.
The mistrust among nations, old rivalry between India and Pakistan and India's hegemonic attitude to smaller neighbours, backed the proposition that the myth can't be a reality. Acknowledging these problems, however, doesn't make anyone pessimistic.
In fact, a three-day brainstorming session organised by the South Asia Watch on Trade, Economics and Environment (SAWTEE) in Kathmandu on April 24-26, 2009, posed that optimism needs to be upheld. Experts and journalists from South Asia engaged in debates over the matter. But fueling optimism would be an important achievement for the workshop when the whole of South Asia is crossing a critical time.
In fact, Sri Lanka has just finished the long fight against the LITE with blood sheds and causalities. Upsurge of extremist and encounters with the army in Pakistan is the most critical events. The outcome will dominate the future direction of the region. Nepal again entered a political crisis when elected Prime Minister Pushpa Kamal Dahal (Prachanda) resigned due to the country army chief s disobedience in the early of the month. New government in India has just formed. Bangladesh is struggling to overcome the post-BDR carnage crisis.
In this backdrop, it may sound odd to talk of enhancing South Asian trade. A review of the different initiatives taken by the nonstate actors over the decades clearly shows that it is a long way but the opportunities will be great. Dr Saman Kelegama, executive director of Colombo-based Institute of Policy Studies, mentioned that the initiatives of the non-state actors, a jargon used as alternative to civil society and NGOs, is remarkable. In technical language, the track two approaches are moving faster than track one (the government and policymakers). In his view, academics, chambers, research institutes, NGOs, and journalists are trying to integrate the region. He. however, mentioned that in the official SAARC process, such unof ficial efforts not properly recognised.
Dr Posh Raj Pandey, president of SAWTEE, revealed that different studies show opposite outcomes of the benefit of full implementation of the South Asian Free Trade Area (SAFIA) agreement. This creates confusion among the members.
Dr Atiur Rahman, now the governor of the Bangladesh Bank, emphasised regional cooperation to address the food and financial crisis, as he believes people are coming closer across the region.
And to make interaction between people easier and effective, Mythili Bhusnurmath, consulting editor of Economic Times, stressed an easy visa processes and political willingness of the countries.
Dr Safdar Sohail, director general of the Foreign Trade Institute of Pakistan, cautioned that if SAFTA docs not go forward, all the regional countries would move to other regions. In fact.
there is no unlimited time to settle the regional disputes, he added.
But Dr Ram Upendra Das, from Delhi-based Research and Information System for Developing Countries (RIS), argued that South Asia is a late starter of regional trade arrangements but it moves faster despite the region's backwardness in the international trade arena. So. the frustration over the slow implementation of the SAFTA agreement is actually misleading. There is no doubt that SAFIA is yet to gain momentum, as expected. But it needs to be considered in the regional context. In my view, Das's arguments need to be taken care of, as it gives a different dimension to the whole debate. Late me paraphrase his arguments, with some additions.
Firstly, the EU is cited as the best example of successful regional trade arrangements. But, it also takes a long time (around 60 years) to make the integration process make a success. In Asia, ASEAN is so far the only successful regional arrangement, which started its journey in 1967.
Secondly, South Asia is one of the poorest regions in the world. About two-thirds of the region's population lives below the poverty
line. India, the regional leader who constitutes about two-thirds of the region, has around 50 crore poor people. India's growth story is not very old and inequality casts shadows on higher growth. In fact farmers are committing suicide in India while the rich are enjoying a colorful life.
In Bangladesh, 40 percent of the people are still poor and the resource gap is widening. In this agro-oriented country, the service sector has been contributing about half of the GDP, reflecting a distorted transformation of the economy. The poverty situation in Nepal is also not encouraging. A shortage of energy and the poor living condition of people forces the nation to continue its struggle against poverty with limited resources.
Thirdly, political turmoil in the region is never-ending. Sri Lanka is in trouble with LTTE. Nepal has made a democratic transition from monarchy but has a long way to consolidation. Bangladesh's democratic journey was severely hampered for the past two years, due to the army backed caretaker government. TYouble in Pakistan is the highest within the region.
Fourthly, businesspeople in the regional countries have high expectations among themselves.
They are ready to export to Europe and America, as it would bring higher returns. But. they have not sufficiently explored regional opportunities The higher flow of informal trade among Bangladesh. India and Pakistan is also a reflec tion of the opportunities.
Das also mentioned that the opportunity cost of region's inability to reduce the differer ces has surged. He revealed an estimation that the excess cost of importing from outside the region, when the same goods could have been sourced from within, was (in the mid '90s) $600 million for Pakistan, $425 million for Sri Lanka and about $250 million for India.
Thus it is not disappointing at all, rather to some extent, it is encouraging. Prior to the full implementation of SAFTA, active discussions on including the service sector in the agreement is present. The South Asian regional investment framework has also been drafted. Talks on a South Asian economic union is also there, no matter how long it takes to make it a reality. So, all these are signs of progress, not backwardness, and disappointment is not as large as publicised.
The writer is a journalist